April 7, 2010

The HIRE Act: Special Payroll Tax Exemption Form Now Available

The HIRE Act: Special Payroll Tax Exemption Form Now Available Tax & Business

On March 18, 2010, President Obama signed into law the HIRE (Hiring Incentives Restore Employment) Act which includes a key piece of legislation that provides tax benefits for employers who hire unemployed workers after February 3, 2010 and before January 1, 2011. These employers may qualify for a 6.2% payroll tax incentive exempting their share of Social Security taxes on wages paid to these newly hired employees. The maximum savings per employee can be as much as $6,621. The employee’s portion of the Social Security will still be withheld from income. (This employee payroll tax savings provision does not apply to Medicare tax.)

A qualified employee is one who worked fewer than 40 hours during the 60 days prior to beginning work and provides a qualifying signed statement. The IRS has released a form (Form W-11,) now posted on IRS.gov, that will be used as the required statement. Eligible employers then use Form 941 to claim the payroll tax exemption for eligible new hires. (The W-11 form is currently posted as a draft form on IRS.gov and will be released next month.)

The payroll incentive will have no effect on the employee’s future Social Security benefits. In addition, for each unemployed worker retained for at least a year, businesses may claim a new hire retention credit of up to $1,000 per worker when filing their 2011 income tax returns.

The exemption relates to salaries paid for work performed after March 18, 2010. Other restrictions and limitations apply. See IRS.gov for more details or contact your Marcum Tax Professional.

NOTE: You may also reference our previous Tax Flash on this subject titled: President Signs HIRE Act: New Law Provides Hiring Incentives and More.

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